Question
Pacelli Company issued 10-year, 10% bonds with a par value of $1,000,000 on January 2, 2013, for $940,000. Interest is paid semiannually on June 30
Pacelli Company issued 10-year, 10% bonds with a par value of $1,000,000 on January 2, 2013, for $940,000. Interest is paid semiannually on June 30 and December 31. On December 31, 2014, $800,00 of the par value bonds were purchased by Salez Company for $820,000. Salez Company is an 80% owned subsidiary of Pacelli Company. Both companies use the straight-line method to amortize bond discounts and premiums. Salez Company declared cash dividends of $60,000 each year during the period 2014-2015.
Required:
A. . Prepare the book entries related to the bonds made by the individual companies during 2015.
I knkow that for Pacelli's books, a debit of interest expense and a credit of cash and discount is made on June 30th and December 31st. I also know that for Salez company, I need to debit cash and credit interest income and premium on June 30th and December 31st. But, how do I calculate the numbers?
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